Payroll taxes from an employer in Armenia
Taxation of personal income is regulated by the Tax Code of the Republic of Armenia (TC RA). Under the general taxation system, income tax (PIT) is levied.
The procedure for paying PIT from income under an employment contract depends on two main factors:
- the status of the employer (whether the employer is recognized as a tax agent);
- tax status (whether an individual receiving income is recognized as a tax resident in Armenia).
Remuneration received under employment contracts concluded with residents or non-residents operating in the Republic of Armenia through a permanent establishment is income from sources in Armenia (clause 1, clause 1, article 144 of TC RA). Remuneration under employment contracts concluded with non-residents who do not operate in Armenia through a permanent establishment is income from sources outside Armenia (clause 4 p. 144 of TC RA). Consequently, the source of income is determined not by the place of work of the employee himself, but by the location of the employer.
Recognition of wages as income from sources in Armenia or income from sources outside of Armenia affects the procedure for paying the tax, as well as the calculation of the tax amount.
At the same time, a permanent establishment of a non-resident is recognized as a place of business in Armenia through a branch, representative office, or without them. In particular, a permanent establishment is a place where work is performed and (or) services are provided through hired employees and (or) other personnel of a non-resident organization or non-resident individual if this activity continues on the territory of the Republic of Armenia in the tax year of 183 or more calendar years. days from the date of commencement of entrepreneurial activity (clause 2, article 27 of TC RA). Permanent establishments are subject to registration with the tax authorities (clause 7, article 27 of TC RA).
As a general rule, regardless of the place of employment, the Armenian employer is recognized as a tax agent in relation to the income of employees - both tax residents and non-residents. The tax agent must calculate, withhold and pay PIT to the budget (clause 1, article 152 of TC RA).
At the same time, as noted above, a foreign organization that does not have a branch or representative office in Armenia, but which operates in Armenia through its employees, can also be recognized as a tax agent. In this case, the foreign organization is recognized as having a "permanent establishment" in Armenia and is subject to tax registration.
Procedure for declaring and paying tax
There are two different reporting periods for taxation (the term "tax period" is not used): in the presence of a tax agent - a calendar month (clause 1, article 151 of the Tax Code of the Republic of Armenia); when paying tax by an individual on his own - a calendar year (clause 3 of article 151 of TC RA).
As a general rule, the employer pays the calculated and deducted PT by the 20th day of the month following the reporting month (clause 1, article 152, clause 1, article 158 of TC RA).
The employer submits the payroll for each month also before the 20th day of the month following the reporting month (clause 1, article 156 of TC RA).
Tax calculation
It is planned to reduce the tax base of an employee by the so-called. reduced income (deductions), in particular, for the following amounts of income from the employer (Article 147 of TC RA):
Income in the form of wages under an employment contract with an Armenian employer is taxed at a rate of 20%, regardless of the tax status of both the employee and the employer (Article 150 of TC RA).
Thus, the procedure for taxation of income under an employment contract with an Armenian employer is the same for any employee, both for tax residents and non-residents.
For your information, below is a summary of the criteria for tax residency in Armenia. More information is available here.
The procedure for paying PIT from income under an employment contract depends on two main factors:
- the status of the employer (whether the employer is recognized as a tax agent);
- tax status (whether an individual receiving income is recognized as a tax resident in Armenia).
Remuneration received under employment contracts concluded with residents or non-residents operating in the Republic of Armenia through a permanent establishment is income from sources in Armenia (clause 1, clause 1, article 144 of TC RA). Remuneration under employment contracts concluded with non-residents who do not operate in Armenia through a permanent establishment is income from sources outside Armenia (clause 4 p. 144 of TC RA). Consequently, the source of income is determined not by the place of work of the employee himself, but by the location of the employer.
Recognition of wages as income from sources in Armenia or income from sources outside of Armenia affects the procedure for paying the tax, as well as the calculation of the tax amount.
At the same time, a permanent establishment of a non-resident is recognized as a place of business in Armenia through a branch, representative office, or without them. In particular, a permanent establishment is a place where work is performed and (or) services are provided through hired employees and (or) other personnel of a non-resident organization or non-resident individual if this activity continues on the territory of the Republic of Armenia in the tax year of 183 or more calendar years. days from the date of commencement of entrepreneurial activity (clause 2, article 27 of TC RA). Permanent establishments are subject to registration with the tax authorities (clause 7, article 27 of TC RA).
As a general rule, regardless of the place of employment, the Armenian employer is recognized as a tax agent in relation to the income of employees - both tax residents and non-residents. The tax agent must calculate, withhold and pay PIT to the budget (clause 1, article 152 of TC RA).
At the same time, as noted above, a foreign organization that does not have a branch or representative office in Armenia, but which operates in Armenia through its employees, can also be recognized as a tax agent. In this case, the foreign organization is recognized as having a "permanent establishment" in Armenia and is subject to tax registration.
Procedure for declaring and paying tax
There are two different reporting periods for taxation (the term "tax period" is not used): in the presence of a tax agent - a calendar month (clause 1, article 151 of the Tax Code of the Republic of Armenia); when paying tax by an individual on his own - a calendar year (clause 3 of article 151 of TC RA).
As a general rule, the employer pays the calculated and deducted PT by the 20th day of the month following the reporting month (clause 1, article 152, clause 1, article 158 of TC RA).
The employer submits the payroll for each month also before the 20th day of the month following the reporting month (clause 1, article 156 of TC RA).
Tax calculation
It is planned to reduce the tax base of an employee by the so-called. reduced income (deductions), in particular, for the following amounts of income from the employer (Article 147 of TC RA):
- voluntary pension payments in the amount not exceeding 5% of the tax base;
- employer's insurance payments for employee health insurance. The deduction applies up to AMD 10,000 (֏) per employee per month;
- the employer's expenses for organizing assistance to individuals, their food, organizing social and cultural events for them, and other similar expenses, as well as the employer's representation expenses - within the limits of the amounts taken into account when taxing the profit of the organization - employer.
Income in the form of wages under an employment contract with an Armenian employer is taxed at a rate of 20%, regardless of the tax status of both the employee and the employer (Article 150 of TC RA).
Thus, the procedure for taxation of income under an employment contract with an Armenian employer is the same for any employee, both for tax residents and non-residents.
For your information, below is a summary of the criteria for tax residency in Armenia. More information is available here.
Armenian tax residency criteria
As a general rule, individuals who actually stay in the Republic of Armenia for at least 183 calendar days during a calendar year are recognized as tax residents (Article 25 of TC RA).
In addition, a tax resident of Armenia is an individual whose center of vital interests is located in the Republic of Armenia, which is recognized as the place where the family and economic interests of an individual are concentrated. Armenia is considered such a place if the following conditions are met:
1) there is a house or apartment in Armenia;
2) the family is in Armenia;
3) the main place of professional or other activity is located in Armenia.
In addition, a tax resident of Armenia is an individual whose center of vital interests is located in the Republic of Armenia, which is recognized as the place where the family and economic interests of an individual are concentrated. Armenia is considered such a place if the following conditions are met:
1) there is a house or apartment in Armenia;
2) the family is in Armenia;
3) the main place of professional or other activity is located in Armenia.
Algorithm for paying PIT from income from an employer in Armenia
*including a foreign employer who is tax registered in Armenia;
**regardless of the tax status of the employee (resident or non-resident);
***check tax liabilities in the country of tax residence
If tax status has changed during the year
As noted above, tax residency is determined based on the results of the year and for the entire calendar year - the tax period for income tax. At the same time, the procedure for taxing income under an employment contract for residents and non-residents is the same. Therefore, changing tax residency during the year is not relevant.
IMPORTANT
In addition to income tax, the income of employees who are citizens of Armenia or persons permanently residing in Armenia are subject to deduction and payment on a monthly basis:
1) Social payments;
2) Stamp duty.
Social payments are withheld at the following rates:
The amount of contributions to the military insurance fund depends on the amount of income of employees:
In addition to income tax, the income of employees who are citizens of Armenia or persons permanently residing in Armenia are subject to deduction and payment on a monthly basis:
1) Social payments;
2) Stamp duty.
Social payments are withheld at the following rates:
- 4.5% of salary up to 500,000 ֏;
- 10% from the amount of salary from 500 000 ֏.
The amount of contributions to the military insurance fund depends on the amount of income of employees:
- 1500֏ with income up to 100,000֏;
- 3000֏ with income from 100,001 to 200,000֏;
- 5500֏ with income from 200,001 to 500,000֏;
- 8500֏ with income from 500,001 to 1,000,000֏;
- 15,000֏ with an income of 1,000,001֏.
In past years, the rate of VAT was set:
Otherwise, the procedure described above is relevant both for the current tax period and for previous years.
- 2022 - 21%;
- 2021 - 22%;
- 2020 - 23%.
Otherwise, the procedure described above is relevant both for the current tax period and for previous years.
Changes are not expected.
Using the buttons below, you can check whether the conditions for recognizing you as a tax resident in the country where you actually work remotely are met, and whether you have an obligation to pay tax on your salary in this country. Also find out whether Armenia has a double taxation treaty (DTT) and its conditions in relation to wages.
Currency control when receiving a salary from an employer from Armenia
The transfer of wages and other payments in favor of an employee in accordance with an employment contract is possible to his account both in an Armenian bank and in a bank account abroad.
However, there may be restrictions in your country of citizenship - select the appropriate country here.